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An Essay on China's WTO Accession Saga Raj Bhala American University International Law Review Volume 15 | Issue 6 Article 9 2000 Enter the Dragon: An Essay on China's WTO Accession Saga Raj Bhala Follow this and additional works at: http://digitalcommons.wcl.american.edu/auilr Part of the International Law Commons Recommended Citation Bhala, Raj. "Enter the Dragon: An Essay on China's WTO Accession Saga." American University International Law Review 15, no. 6 (2000): 1469-1538. This Article is brought to you for free and open access by the Washington College of Law Journals & Law Reviews at Digital Commons @ American University Washington College of Law. It has been accepted for inclusion in American University International Law Review by an authorized administrator of Digital Commons @ American University Washington College of Law. For more information, please contact [email protected]. ENTER THE DRAGON: AN ESSAY ON CHINA'S WTO ACCESSION SAGA RAJ BHALA* I. THE IMPORTANCE OF THE CHINA CASE STUDY .... 1470 A. THE ACCESSION PROCESS ................................. 1471 B. EARLY HISTORY: THE CURIOUS WITHDRAWAL ............ 1477 C. THE FIRST STEPS TOWARD MEMBERSHIP .................. 1478 * Patricia Roberts Harris Research Professor of Law, The George Washington University Law School, 2000 H Street, N.W., Washington, D.C. 20052. Tel. 202- 994-2266. Fax. 202-994-9446. A.B. (Economics), Duke University, 1984; M.Sc. (Economics), London School of Economics, 1985; M.Sc. (Management), Oxford University, 1986; J.D., Harvard University, 1989. Marshall Scholar, 1984-86. I am grateful to Professor Jeffery Atik, Suffolk Law School, for inviting me to write this essay and present it at an American Society of International Law meeting in February 2000, and to Professor Jeffrey Dunoff, Temple Law School, for his support in publishing it. I also am grateful to the following friends for the opportunities they provided to present earlier drafts of this essay: my GW colleagues, Professors Ralph Stein- hardt and Sean Murphy, at a GW adjunct faculty lunch on 22 March 2000; Profes- sor Michael Vitiello, McGeorge Law School, at a McGeorge faculty lunch on 10 March 2000; participants at a Workshop on Lao Legal Reform in Vientiane, Laos on 15 March 2000 and at a World Bank lunch in Washington, DC on 25 May 2000; and participants at a G.W. L.L.M. alumni reunion lecture at Oxford Univer- sity on 22 July 2000. I am thankful for the many helpful comments and sugges- tions I received in all of these venues. As always, my cosmopolitan research assistants at GW did a first-class job helping me edit this essay: Mohammed Zakirul Hafez (Bangladesh); Kris Hansen (Iowa); Preeti Kapoor (Michigan); Khattar Torbey (Lebanon); and Christian Ulrich (Germany). Where would I be without them? Finally, I cannot help but note this is the first piece written following the birth of my daughter, Shera. I am ever so pleased to dedicate the essay to her in the hope that she may one day experience the wonder, awe, and humility that I have in trav- eling through China. 1469 1470 AM. U. INTL L. REV. [15:1469 D. THE FAILED EFFORT TO BECOME A FOUNDING WTO M EM BER ................................................. 1481 E. ACCESSION NEGOTIATIONS IN 1996-98: THE AMERICAN POSITION ................................................. 1487 F. ACCESSION NEGOTIATIONS IN 1996-98: THE DEBATE IN THE PRC, CHINESE CONCESSIONS, AND THE AMERICAN R EPLY .................................................... 1490 E. THE Low POINT: EARLY AND MID 1999 ................... 1497 G. THE FINAL PUSH FOR A BILATERAL AGREEMENT WITH THE UNITED STATES: FALL 1999 .......................... 1505 II. THE BILATERAL AGREEMENT OF NOVEMBER 15, 19 9 9 ....................................................... 15 1 1 A. CONTROVERSIES SURROUNDING THE NOVEMBER 15, 1999 BILATERAL AGREEMENT ............................ 1519 B. IGNITING ECONOMIC AND POLITICAL CHANGE IN CHINA ... 1523 C. CAPITOL HILL POLITICS, REMAINING BILATERAL AGREEMENTS AND ACCESSION AT LAST? .......... .. ... 1528 CONCLUSION: THE DRAGON ABOUT TO ENTER ........ 1530 I. THE IMPORTANCE OF THE CHINA CASE STUDY How did a country join the General Agreement on Tariffs & Trade ("GATT")? How does a country become a member of the World Trade Organization ("WTO")? GATT Articles XXXII-XXXIII and WTO Agreement Articles XI-XII provide the answers. To examine these provisions in the context of China's bid to join or re-join, is entertaining and instructive. The story itself is an epic saga, and no country currently seeking WTO membership - Saudi Arabia, Iran, and Russia, for example - could possibly raise a more complex array of issues than the People's Republic of China ("PRC"). Neither the principles nor policies, theories nor doctrines, laws nor regulations in the domain of international trade are irrelevant to the PRC epic. Using the PRC case study as a vehicle for examining how coun- tries join the WTO club does not imply that the PRC is a uniquely important applicants. Nor does it imply an endorsement of former United States Secretary of State James Baker's statement in his April 7, 1999 Financial Times editorial that "[t]he United States has no 2000] CHINA 'S ACCESSION TO THE JWTO 1471 bilateral relationship today more important than that with China." In a provocative article in the September/October 1999 issue of Foreign Affairs, Gerald Segal, the Director of Studies at the London-based International Institute for Strategic Studies, argues persuasively that the Middle Kingdom is a second-rank power that has mastered the art of diplomatic theater. China is worthy of no more attention than Brazil or India. Trotting out an array of statistics, Segal points out that the PRC's real status in the global economy is far less important than western political and business officials believe. For example, in 1997 the PRC accounted for a measly 3.5 percent of world GNP (the United States was 25.6 percent), and its per capita GDP ranking was eighty-one (roughly $773), making China fall behind Papua New Guinea. In 1997, the PRC made up just three percent of world trade - the same as Korea and less than Holland - and only eleven percent of total Asian trade. (Interestingly - before the Communist "liberation" of 1949--China's importance as a trading power peaked in 1928, when it accounted for 2.3 percent of world trade. The PRC did not surpass this level until 1993. In 1977, on the eve of the transition away from a command economy, it accounted for just 0.6 percent. The PRC currently ranks 107th on the United Nations Human De- velopment Index, resting between Albania and Namibia. Likewise, the PRC's military capabilities are, says Segal, vastly overstated and it has no fearsome allies. The PRC accounts for barely 4.5 percent of global defense spending, whereas the United States stands at 33.9 percent. Culturally, the PRC is a beacon for no one. India exerts a far greater cultural call on non-resident Indians than does China on over- seas Chinese, who are influenced far more by films, music, literature, and the arts from Hong Kong, Taiwan, and even Singapore. Segal, however, may have forgotten about the resilience and en- trepreneurial zeal of the Chinese people, and about the vast and unique potential of the Chinese nation. Whatever the merits of his argument, the point of the PRC case study is that it embodies all of the issues that could possibly arise in accession-the the proverbial "worst case" scenario. The multilateral trading system will never again witness such an accession saga. A. THE ACCESSION PROCESS Article XXVI of GATT contains provisions governing the entry 1472 AM. U. INT'L L. REV. [15:1469 into force of the agreement. As specified in Article XXXII, the "contracting parties" are those countries that are original (i.e., founding) parties of GATT or that subsequently acceded to GATT. Article XXVI is relevant to the original contracting parties, whereas Article XXXIII establishes the process of accession for countries that are not founding members. The twenty-three original contracting parties are: Australia, Belgium, Brazil, Burma (Myanmar), Canada, Ceylon (Sri Lanka), Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Paki- stan, Southern Rhodesia (Zimbabwe), Syria, South Africa, United Kingdom, and the United States. Article XXX: 1 of GATT states that amending GATT requires ei- ther a two-thirds or unanimous vote of the CONTRACTING PARTIES, depending on the provision being amended. Article XXXIII requires a two-third majority to amend a provision. Article XII of the WTO Agreement is little more than an echo of the GATT Article XXXIII, which is minimalist in content. Article XXXIII allows governments that are not a party to the GATT (or a government acting on behalf of a separate customs territory that possesses full autonomy in its exter- nal commercial relations) to accede to the GATT. This can only oc- cur based on terms agreed to between the applicant government and the CONTRACTING PARTIES. Then, the CONTRACTING PARTIES must approve a decision in favor of accession by a two-thirds majority. Over time, the GATT practice developed to fill in the details that Article XXXIII does not address. Conceptually, and in practice, accession is a two-step process. First, the applicant must negotiate bilateral concession agreements with each WTO member that asks for one. Collectively, the members requesting bilateral agreements are referred to as an "accession Working Party." The bilateral deals embody the applicant's promises to individual members about opening its market on a government-to- government basis. They should not be confused with previously ne- gotiated deals that the applicant may have made with particular members. Brand new agreements, or at the least, revisions to existing agreements are at issue here. These new agreements are the price of admission into the GATT-WTO system. The need for this first step is not apparent from the language of 2000] CHINA 'S ACCESSION TO THE JVTO 1473 GATT Article XXXIII, which, after all, speaks to the joint action of the CONTRACTING PARTIES.
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